This Was Not A Good Thing

March 10, 2004

Greed and hubris can prove more costly than losing money on Wall Street. That's the lesson from Martha Stewart's conviction last week on four counts of lying, conspiracy and obstructing an investigation.

All this for trying to avoid losing money two years ago by selling shares in a company called ImClone Systems run by a friend, Sam Waksal. Her unloading of 3,938 shares, to save $45,000, may now cost her jail time, control of her business empire and her good name.

This is the way investing should work: You do your homework. You place your money on a company. Then you hope for the best knowing some days you win, other days you lose.

Having faith in the system means you accept this, with the knowledge that, over time, America's stock markets have provided a greater return than other forms of investment.

However, there are people who do not believe this is enough of an assurance. They must always win. They must always come out ahead. And to do so, they are willing to cheat.

That was Stewart's failing. On a December day more than two years ago, she fielded a call from the assistant to her stockbroker who gave her a tip -- Waksal was going to dump his shares in ImClone.

At that moment, Stewart could have done the right thing. She could have hung up the phone and accepted that this news meant bad fortune and that she and an untold number of other ImClone shareholders were going to take a beating on the markets.

"It happens," she could have told herself, "but at least I have a multimillion dollar business, TV shows and other opportunities to fall back on, and I had better not jeopardize them by doing something stupid and illegal."

Unfortunately, she didn't tell herself this. Instead, she decided to sell her shares based on priviledged information other investors did not have. That tip, and subsequent actions she took to deceive investigators, laid the groundwork for her criminal conviction.

Stewart will appeal. Some of her still-loyal fans will say their icon is being unfairly prosecuted.

Her followers are wrong. Martha Stewart has no one to blame but herself. She could have admitted her mistake long ago, asked for forgiveness and cited an otherwise clean record of financial and business management.

Instead, the woman who tutored millions of Americans in ways to cook and fix-up their homes, now is a model for a different lesson: Don't cheat, and if you make a mistake, 'fess up quickly and completely.